Factors Contributing to Ethereum’s Recent 7% Price Decline
Several influential entities, among them notable institutional investors, engaged in selling off portions of their Ethereum [ETH] holdings, leading to a significant drop in the altcoin’s price. In a span of just 24 hours, ETH witnessed a depreciation of over 7%.
Recent data from Lookonchain highlighted that Cumberland, a trading firm, transferred a total of 17,206 ETH to exchanges, valued at $57.3 million during the transactions. FTX also sent $8.33 million worth of ETH to Binance. Additionally, two other institutions collectively sold off $39.92 million in ETH.
Possible Impact on Short-term Investors
Whales, like these entities, may sell their assets for various reasons. While some might opt for profit-taking, others could be moving away from cryptocurrencies that have underperformed. However, Ethereum does not seem to fit the latter category.
At this moment, CryptoCrypto could not ascertain the motivations behind these sell-offs. However, it’s evident that these actions significantly influenced Ethereum’s price drop to $3,169. As of the latest update, ETH’s valuation had recovered slightly to $3,262. The crucial question now is whether this minor uptrend can be sustained.
To address this concern, CryptoCrypto examined several metrics that might impact ETH’s value, with Mean Dollar Invested Age (MDIA) taking precedence.
MDIA reflects the average age of coins held in a single wallet. A rising MDIA indicates that many coins have been inactive and stationary for an extended period, while a declining MDIA suggests that older coins are moving. In Ethereum’s case, on-chain data from Santiment revealed a spike in 90-day MDIA.
Previous data trends suggest that a sharp drop in this metric usually precedes a local peak, inferring that ETH might be undervalued at present, potentially offering an opportunity for investors to buy at lower prices before a potential uptrend commences.
Outlook for the Near Future
Another metric CryptoCrypto scrutinized was network growth, which tracks user adoption trends over time. An uptick in network growth indicates a project gaining traction, while a decline implies the opposite.
On 12 April, Ethereum’s network growth stood at 128,000, indicating substantial interaction with new addresses. However, the recent price decline prompted a decrease to 36,100. If network growth rebounds, the resulting demand for ETH could bolster price action.
Conversely, a continued downturn in this metric might lead to price stagnation. Additionally, the one-day circulation fell to 230,000, suggesting reduced usage.
In light of the declining circulation, there could be lower selling pressure on ETH, potentially signaling a brighter outlook. Should the usage of coins continue to decrease, Ethereum’s price might break free from the slump witnessed over the past day.